How does Social Media Benefit Startups in Emerging Markets? Evidence from China’s VC market and WeChat Engagement

Xiaoning (Gavin) Wang, PhD Candidate, The Wharton School

Abstract: Entrepreneurial strategies to cope with dynamic environments are becoming increasingly important globally with the heightened technological and institutional disruptions in the recent and coming years. These dynamic environments are usually characterized by high velocity, complexity, ambiguity and unpredictability, creating additional challenges for entrepreneurs to find and realize opportunities. Prior research in understanding this phenomenon mostly focuses on Western developed countries (often the U.S.) with market-based and democratic institutions. However, as entrepreneurs are increasingly seeking opportunities in nascent sectors with evolving regulatory institutions, strategies that were originally identified for developing economies may be highly relevant and valuable for managing the dynamic environment in the new information economy. In particular, we focus on the role of technologies in this environment by examining how social media affects entrepreneurial activities in China and compare the effect with that in the U.S. We plan to study how social media benefits startups for attracting venture funding in emerging markets (specifically, China) through 2 mechanism: (a) Lowering information barriers between investors and investees by alleviating information asymmetries, and (b) lowering institutional barriers faced by startups and help startups to win preferential policies.